Article by Katherine Cornell - 8th February 2018

Experian Help Rent Payments Contribute To Credit Score

Tenants have often felt hard done by, receiving no recognition or reward for keeping up with their single biggest monthly outgoing: rent. For that reason, many across the UK will welcome the news that it’s now been made easier for landlords and letting agents to report rent payments to credit reference agencies, finally contributing to their credit file.

Experian’s recent introduction of the Rental Exchange means for many tenants monthly payments will now count towards their credit history, provided their letting agent or landlord have signed up to the service and as long as the tenants consent to their information being shared.

Background

The idea of having your rent payments count towards your credit report isn’t a new one and indeed there have been services in the UK that will let you do this for a couple of years now. In fact, as part of the 2017 Autumn Budget, the government launched a £2 million scheme for FinTech companies to find a solution that would work across the board.

The recent governmental interest in the topic follows on from a petition that gained 147,300 signatures online, urging MPs to consider rental payment information. The petition was started by Jamie Jack Pogson who claims he has spent upwards of £70,000 in rent payment alone, but still struggles to get a mortgage. The official response given in May 2017 was that “Meeting rental payments is not sufficient in itself to demonstrate affordability over the lifetime of the loan.” However in October this was more widely discussed by MPs and has since become a hot political topic.

What is the Rental Exchange?

The Rental Exchange treats rental payment data similarly to mortgage or loan payment data, by forwarding information on each payment to Experian, who then update your credit report with this data.

This information is mutually beneficial to renters and landlords, as it lets tenants build a credit report that will make it easier to apply for credit cards, loans or a mortgage in the future but it also gives the owner of the property an insight into the applicant’s previous rent payment history. These are different to the credit checks carried out by landlords during an application, which are still largely used a way to gauge the applicant is who they say they are and that there are no serious arrears such as CCJs or bankruptcies.

How does it work?

Landlords and letting agencies can sign up for the scheme, at which point their current tenants will be given the option to share their rental payment information with Experian. Once both the landlord and tenant are signed up to the Rental Exchange all rental payments will begin to generate a payment history for the tenant.

If landlords aren’t signed up, tenants are being encouraged to inform them about Rental Exchange. At present it’s only available to landlords or agents with more than 100 properties. If they manage a smaller number then tenants will have to sign up to Credit Ladder, who can share payment information with Experian in a similar manner.

There is no cost to either the housing provider or the tenant for the service and signing up is entirely optional.

It’s a two way street: according to Experian 60% of tenants said they’d be more likely to make sure their rent is paid on time if it was reported to a Credit Reference Agency, so it is likely to encourage more people to pay on time, which will be popular with landlords. However missed rent payments will now be recorded on your credit file, meaning it could carry as much weight as any other missed payment, making it more difficult to get granted credit if it becomes a recurring problem.

The platform doesn’t have any influence over payments, it merely reports them, and it would still be the tenant’s responsibility to adjust standing orders or direct debits should they change banks or the monthly rent goes up.

Are there any drawbacks?

At present Experian are the only Credit Reference Agency signed up to any type of rental information scheme, which means if you apply for any form of credit and they check your credit history using an agency other than Experian, your rental payments will not be taken into consideration.

For would-be tenants that have undergone a period of financial hardship and have been late with payments in the past, this might also make it more difficult to find a landlord willing to accept them.

Both credit applications and landlord checks will also look at other aspects of your credit file, such as your presence on the Electoral Roll, so it’s important to not forget about the bigger picture. You’ll also find your credit report is useful on more than one occasion when you’re ready to get on to the property ladder yourself.

Seeing a good rental history will undoubtedly be viewed positively by lenders, but until such time as it becomes more widely used, more traditional ways of building up a credit history like using credit cards regularly is a good plan.

You can see how your credit file looks according to the UK’s four main credit reference agencies with checkmyfile, the UK’s only multi-agency credit report. If you’re not already a member, you can try us free for 30 days and then for £14.99 per month afterwards, which you can cancel anytime.

The UK's First Provider Of Online Credit Reports

Launched 21 Years, 35 Million Credit Scores & 8 Million Credit Reports Ago

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